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Banks only just started consolidating
A young national market
The U.S. also has 78,299 branches. Until the 20th century, banks were allowed one self-contained location, with no branches, and even then they were generally confined to a single state. Only since the 80s and 90s have they been allowed to expand nationwide, which has given them about 30 to 40 years to consolidate.
Limits on big banks
The law also blocks the biggest banks from growing by purchase. Banks with over 10% of the nation's total deposits are generally barred from mergers and acquisitions, so Wells Fargo, Bank of America, and Chase, with 10, 15, and 16% market share, respectively, can only expand by opening new locations.
Why small banks remain
The other 99.9% of banks are allowed to swallow up their competition. Since the 80s, Walmart has conquered most of rural America, and yet thousands of small-town, family-run banks remain. Just Chase, Wells Fargo, and Bank of America collectively hold nearly half of the nation's deposits.
Why was American banking once limited to one office?
Fear of concentrated financial power ran deep in early American politics. President Andrew Jackson vetoed the recharter of the Second Bank of the United States in 1832, and its federal charter ended in 1836. Many states then wrote unit banking laws that protected local bankers from out-of-town competitors. The McFadden Act of 1927 let national banks branch only where state law allowed it.
Why does Canada have so few banks?
Canada allowed nationwide branching from the nineteenth century, so a handful of large banks grew across the whole country. During the Great Depression, thousands of American banks failed, while Canada's banks avoided a comparable wave of failures. Economic historians Michael Bordo, Angela Redish, and Hugh Rockoff have pointed to the Canadian system's few, large, geographically diversified banks as a reason for that resilience.
Why does the law cap deposit share?
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 allowed banks to expand across state lines but wrote limits to keep any one bank from dominating. A bank generally cannot acquire another if the result would control more than 10 percent of insured deposits nationwide. A separate limit of 30 percent applies to a single state's deposits, though states can set their own caps. Both limits apply to growth by acquisition, so a bank that grows by attracting customers faces no such cap.
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